Hype or Hope

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For the past year, Richard Cameron has been on a mission. The divisional CFO of BT has been overseeing an ambitious project that could help the £20.7 billion (€26 billion) UK telecoms group slash millions of pounds a year off its energy bills and cuts its carbon emissions by 80% from 1996 levels by 2016. But it’s IT, not finance, that’s taking centre stage. A large part of the plan hinges on making the company’s IT more environmentally friendly, from software that boosts the energy efficiency of its servers to encouraging staff to turn off computers.

It’s a tall order, not least because of all the hype. When it comes to judging the green credentials of suppliers’ offerings, “you can’t accept anything in blind faith,” says Cameron, who became CFO in June of BT Operate, which runs customer services and monitors all of BT’s networks.

Not many companies are willing to take the leap. When Brocade, a network storage company, surveyed 8,000 European directors earlier this year, it found that less than a fifth were actively seeking to buy green IT. As for the rest, many said they found the eco-friendly IT pitches “all marketing hype.” So how can CFOs know whether their IT leaders are investing in truly eco-friendly software and hardware or — to use a new term coined by industry geeks — are just being “greenwashed”? “There is a lot of hype about the green side of IT,” says Peter Williams, an analyst at Bloor Research. “If finance directors do not understand the technologies, they may have the wool pulled over their eyes.”

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To avoid succumbing to greenwash, CFOs should grill suppliers about their products. For example, a hardware supplier may advise a customer to replace an existing server with a newer model that uses less power and is marketed as more environmentally friendly. But the supplier may not reveal that the old server could have been modified to use less energy.

Part of the probing should include due diligence to find out whether the vendors themselves are toeing the green line. Such due diligence is not a widespread practice. A survey of 350 IT decision makers at UK companies earlier this year by Bell Micro, a computer components distributor, found that while nearly three quarters of respondents outsourced some or all of their IT, only around 25% check the green IT credentials of their outsourcer.

Environmental experts predict that this might become easier as more vendors follow the lead of Lexmark, a US maker of printers and toner, which has lowered its products’ energy consumption and runs a programme to reclaim and recycle used equipment. Its annual environmental sustainability report publishes progress on helping customers to print less and recycle more, and its own use of environmentally friendly materials.

BT’s Cameron recommends proactively targeting vendors to get green issues on the table. With a network of nearly 700 vendors, BT’s managers hold regular meetings with each supplier. “It’s about pushing to get energy efficiency on the radar of our [IT] suppliers,” Cameron says. “It’s a key commitment to reduce our operating costs and carbon footprint. We need our whole supply chain lined up to help us deliver that.”

He is already seeing the benefits of the new programme. Seemingly simple measures such as circulating fresh air rather than chilled air to cool servers have been a quick win — fresh-air cooling can be used for 80% of the year, reducing the need for chilled-air cooling and cutting energy costs. At a more technical level, BT has saved money by reducing the number of servers in its 77 data centres worldwide thanks to so-called “virtualisation” technology, which divides a physical server into multiple “virtual” machines, each with its own operating environment and applications, which require less hardware, power and cooling.

This is one of the more popular green IT strategies. “Virtualisation is potentially one of the most effective green technologies,” says Williams of Bloor. “It is fairly simple to explain and relatively easy to install.” To that end, research firm Gartner predicts that the number of virtual machines will increase from around a half a million in 2006 to more than 4m by next year.

Law and Order

With green IT regulations set to increase, more CFOs will need to thoroughly assess the environmental friendliness of their companies’ IT. The European Commission published a draft code of conduct on the energy efficiency of data centres in April, which proposes to set energy efficiency targets for centres in the corporate and public sectors. Meanwhile, member states are taking their own steps. For example, the UK government is planning a mandatory trading scheme for carbon emissions, which is due to start in 2010 and will cover large businesses and public-sector organisations. “Our clients seem to accept that more regulations will come, be it at an industry level, EU level or globally,” says Richard Brown, partner in the technology and security risk services practice at Ernst & Young. The enormity of the challenge is hard to ignore. “The green element of data is spread across spreadsheets and lots of different IT systems,” he says. And there’s good reason for CFOs to believe that their companies are sitting on lots of that data. Gartner estimates that at a minimum, 2% of global atmospheric carbon emissions can be traced to IT because of the electricity consumed by PCs, servers, telecoms and so on.

As belts tighten, CFOs will have another urgent reason to cut through the hype. Greg Garrison, director of performance consulting at PricewaterhouseCoopers, recalls advising a multinational company that reduced the number of IT applications it used to 150 from 750 and saved “tens of millions of euros.” Fewer IT systems meant the company spent less money on product licences and needed fewer IT staff, and energy costs also fell.

CFOs shouldn’t feel they need to be a techie to oversee the process. In fact, Garrison advises finance chiefs to work closely with IT directors on green IT without getting bogged down in technical details. “The CFO’s role is to challenge and enable IT,” he says. As the concept of green IT is still producing more exhortation than action, more CFOs can expect to be doing just that. As BT’s Cameron notes, “It is cheaper for companies to do something when it comes to climate change than do nothing.”